Akamai reports in line results...but don't be afraid to buy

Akamai Techonologies (NASDAQ: AKAM), the leading global service provider for accelerating content over the web, published its first quarter 2007 results this afternoon. The following are a few of the highlights from their latest release:

• Revenue was 53% higher than the same period last year, and 11% higher than last quarter
• GAAP net income was US$0.11 per share, 67% over 1Q 06, while normalized net income increased 73% year-over-year, and 7% from 4Q 06
• EBITDA margin for the first quarter was 42%, or 5% better than the same period last year
• Gross margin of 76% in 1Q 07
• The company ended March 2007 with approximately US$480 million in cash, cash equivalents and marketable securities, or US$43 million higher than the period ending December 31, 2006
• AKAM also added 89 new customers during the period, for a total quarter-end number of customers of 2,481 (their customer list is already quite impressive and includes the likes of 1800 flowers, Amazon.com, Apple, CBS Sportsline, ESPN, MTV, MySpace, Yahoo, Reuters, WWE, and many more which I encourage you to take a look at on their website: http://www.akamai.com/html/customers/customer_list.html)
• Management also reiterated that revenue growth for the year 2007 will be between 42 and 46%

AKAM shares fell 10% during trading hours, plus an additional 4% in extended trading. The stock was under a lot of pressure due to the very high expectations of Wall Street. The results came in line and now most investors expect that AKAM will be downgraded by pretty much everyone that follows it.

I don't think there is a more exciting space to be in than the content delivery segment, or what is sometimes referred to as internet infrastructure. If you watched March Madness on CBS, it was streamed by Akamai; you change your picture on MySpace and the content will most likely be carried by Akamai; you purchase the latest Harry Potter book through Amazon, and Akamai will assure you a seamless shopping experience. It is no secret that video streaming, online shopping, and any other delivery of media and software over the web is undergoing a boom. Keep in mind that Akamai has approximately 70% market share of this segment.

I am disappointed that results only came in line, I too, had higher expectations. On the other hand, am I willing to pay the price for upwards of 40% revenue growth, and steadily increasing margins? - Call me an optimist, but I welcome the sell off, it gives me a chance to remind people that companies like Akamai, are few and far between.